- Emerging market currencies remain under pressure amid risk aversions.
- USD/MXN erases yesterday’s losses, approaches the upper limit of the current range.
- Banxico meeting on Thursday: Consensus expects no change, but some see a rate cut.
The USD/MXN accelerated to the upside during the American session, and it just broke above 19.70, reaching the highest level in two days and making a critical reversal from 19.35. The next relevant resistance is the 19.80 area: a consolidation on top would clear the way for a test of 20.00.
The US Dollar gains 2% against the Peso, the most in two months, boosted by risk aversion across global markets that weight, particularly on Emerging market currencies. Growth concerns impact on market participants.
On Thursday the Bank of Mexico will decide on monetary policy. Currently, the rate stands at 8.25% the highest in a decade. With the economy stagnated, the bias favors a dovish statement but not necessarily a rate cut yet.
MXN Outlook
From a fundamental perspective, the current financial environment is not positive for Emerging markets. Expectations of rate cut across the G10 are not enough to offset global growth concerns, geopolitical conflicts and the new collapse in Argentinean assets. The last might not have a significant impact in the future, but near term, it had an impact in Latin American currencies. “In our opinion, the contagion from Argentina to other emerging markets will be limited (unless it defaults on its debt) due to the relatively small size of the Argentine economy and easing mode of the Fed and ECB. In general, emerging markets are driven more by trade war issues, the state of the global economy and the monetary policy stances of the Fed and other big central banks”, said Danske Bank analysts
Regarding USD/MXN, Rabobank analysts consider that the recent move in pushed the pair above their 19.30 forecast from a month ago and close to their 19.80 target for the end of Q3. “Our forecast is for the pair to trade with a 20 handle heading into year-end but of course we could get there much sooner. That said, we are reticent to change our forecast quite yet and will wait to see how markets trade for the entirety of this week”.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
USD/JPY holds above 155.50 ahead of BoJ policy announcement
USD/JPY is trading tightly above 155.50, off multi-year highs ahead of the BoJ policy announcement. The Yen draws support from higher Japanese bond yields even as the Tokyo CPI inflation cooled more than expected.
AUD/USD extends gains toward 0.6550 after Australian PPI data
AUD/USD is extending gains toward 0.6550 in Asian trading on Friday. The pair capitalizes on an annual increase in Australian PPI data. Meanwhile, a softer US Dollar and improving market mood also underpin the Aussie ahead of the US PCE inflation data.
Gold price keeps its range around $2,330, awaits US PCE data
Gold price is consolidating Thursday's rebound early Friday. Gold price jumped after US GDP figures for the first quarter of 2024 missed estimates, increasing speculation that the Fed could lower borrowing costs. Focus shifts to US PCE inflation on Friday.
Stripe looks to bring back crypto payments as stablecoin market cap hits all-time high
Stripe announced on Thursday that it would add support for USDC stablecoin, as the stablecoin market exploded in March, according to reports by Cryptocompare.
Bank of Japan expected to keep interest rates on hold after landmark hike
The Bank of Japan is set to leave its short-term rate target unchanged in the range between 0% and 0.1% on Friday, following the conclusion of its two-day monetary policy review meeting for April. The BoJ will announce its decision on Friday at around 3:00 GMT.